Itaú expands Andean reach with CorpBanca deal

In the largest-ever bank merger in Chile, Itaú-Unibanco grows its market share and sets a foothold in Colombia

Chile’s CorpGroup agreed to merge its banking
operations with Itaú Unibanco late Tuesday, in a deal
that expands the Brazilian brand in Chile and Colombia and
gives it a platform for further growth.

The Brazilian lender will take a 33.58% stake in the new
Chilean bank, to be branded Itaú, and become controlling
shareholder. CorpBanca’s existing shareholders
will hold the remainder. Itaú will inject $652m of
equity to its Chilean subsidiary ahead of the merger to
capitalize the new institution and prepare it for future
growth.

The agreement makes Itaú the fourth largest Chilean
retail bank — until now it ranked seventh —
growing its market share there from 4% to 12%. It will also
gain a foothold in the fast-growing Colombian market, through
CorpBanca’s operations there.

The deal is thought to address a desire at CorpBanca expand
in Chile through acquisition. As well as giving Itaú a
more solid position in Chile and an entry into Colombia, it
offers a platform to move into other markets like Peru and
Central America, said Mark Rosen, head of investment banking
for Latin America at Bank of America Merrill Lynch, which with
Goldman Sachs was advisor to CorpBanca. Itaú BBA advised
Itaú.

"This is the most significant strategic alliance for
Itaú that they’ve made outside Brazil so
far," he said. "Nothing they’ve done in the past
is of the scale of this transaction. It’s a
transformational deal for the international business of
Itaú."

The deal is the largest merger of financial institutions in
Chile, and the largest in Latin America since 2008.

The transaction is "solidly cash accretive to earnings per
share", said Rosen: "It significantly improves the capital base
of CorpBanca. And there are significant synergies."

The deal comes after extensive talks which began in
mid-2013. Spanish lender BBVA was understood to also be
discussing an acquisition of CorpBanca.

CorpBanca is 45.26% owned by CorpGroup. Moody’s
downgraded both entities in December, citing contagion concerns
from related company SMU. It rates CorpBanca Baa3. Standard
& Poor’s rates the bank BBB, downgrading it in
August after CorpBanca bought Helm Bank in Colombia.
LF

See LatinFinance’s Daily Brief
on Thursday for further analysis of the
transaction.

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